Tower Company owned a service truck that was purchased at the beginning of Year 1 for $51,000. It had an estimated life of three years and an estimated salvage value of $3,000. Tower company uses straight-line depreciation. Its financial condition as of January 1, Year 3, is shown on the first line of the horizontal statements model. In Year 3, Tower Company spent the following amounts on the truck: Jan.4 Overhauled the engine for $8,000. The estimated life was extended one additional year, and the salvage value was revised to $2,000.July6 Obtained oil change and transmission service, $450.Aug.7 Replaced the fan belt and battery, $550.Dec.31 Purchased gasoline for the year, $9,500. 31 Recognized Year 3 depreciation expense. RequiredRecord the Year 3 transactions in a statements model. (In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), a financing activity (FA), or net change in cash (NC); leave the cell blank if the Statement of Cash Flows is not affected. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells will require entry.) DateBalance1/47/68/712/3112/31TotalCashAssets40,000 +++++++Balance SheetBV Truck19,000 =TOWER COMPANYHorizontal Statements Model for Year 3=Stockholders' EquityRetainedEarningsCommonStock17,000++++++42,000RevenueIncome Statement--1-1Expense Net Income======Statement ofCash Flow

Name: Tower Company owned a service truck that was purchased at the beginnin
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Description: Tower Company owned a service truck that was purchased at the beginning of Year 1 for $51,000. It had an estimated life of three years and an estimated salvage value of $3,000. Tower company uses straight-line depreciation. Its financial condition as

The statement of cash flows shows how the cash has changes over the accounting period. If the net…

Answered: Tower Company owned a service truck…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Tower Company owned a service truck that was purchased at the beginning of Year 1 for $51,000. It had an estimated life of three years and an estimated salvage value of $3,000. Tower company uses straight-line depreciation. Its financial condition as of January 1, Year 3, is shown on the first line of the horizontal statements model.

In Year 3, Tower Company spent the following amounts on the truck:


Jan.	4	Overhauled the engine for $8,000. The estimated life was extended one additional year, and the salvage value was revised to $2,000.
July	6	Obtained oil change and transmission service, $450.
Aug.	7	Replaced the fan belt and battery, $550.
Dec.	31	Purchased gasoline for the year, $9,500.
	31	Recognized Year 3 depreciation expense.

Required

Record the Year 3 transactions in a statements model. (In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), a financing activity (FA), or net change in cash (NC); leave the cell blank if the Statement of Cash Flows is not affected. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells will require entry.)

Date
Balance
1/4
7/6
8/7
12/31
12/31
Total
Cash
Assets
40,000 +
+
+
+
+
+
+
Balance Sheet
BV Truck
19,000 =
TOWER COMPANY
Horizontal Statements Model for Year 3
=
Stockholders' Equity
Retained
Earnings
Common
Stock
17,000+
+
+
+
+
+
42,000
Revenue
Income Statement
-
-1
-1
Expense Net Income
=
=
=
=
=
=
Statement of
Cash Flow

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